Buffett’s Berkshire and more insurers join in, as the US doubles Hormuz shipping insurance to $40 billion.

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As tensions persist in the Middle East and global energy transport routes are obstructed, the United States is further employing financial tools to stabilize market confidence.

On Friday, April 3rd (ET), the U.S. International Development Finance Corporation (DFC), a U.S. government development finance agency, announced that its reinsurance support for shipping through the Strait of Hormuz would be increased to $40 billion, while bringing in more large American insurance institutions. This signals a significant upgrade in the U.S.'s “financial escort” for Gulf energy shipments and highlights the severe challenges currently facing the energy supply chain.

Disruptions in Hormuz shipping have already caused a chain reaction in global markets. On one hand, energy supply tightness has pushed up international oil and gas prices, impacting numerous countries reliant on Middle Eastern energy imports, especially large consumers like India. On the other hand, U.S. domestic gasoline prices have risen back above $4 per gallon, intensifying inflationary pressures and consumer burdens.

Against this backdrop, the U.S. has chosen to “underpin” the shipping sector through insurance mechanisms—in essence, attempting to maintain global energy flows using financial means outside of military methods.

Six New Partners Including Berkshire Hathaway and AIG

According to the DFC’s Friday notice, this reinsurance expansion is the second phase of support built on the reinsurance plan launched in March. On top of the $20 billion rolling coverage provided by DFC, Chubb and several other major U.S. insurers will jointly provide an additional $20 billion, bringing the total scale of the marine reinsurance mechanism to $40 billion.

Chubb will act as the lead underwriter, responsible for managing the reinsurance mechanism, including setting pricing and underwriting terms, undertaking risks, and issuing policies for eligible vessels and cargo. Additionally, Chubb will have full authority to handle all claims matters.

According to the notice, new reinsurance participants include Travelers, Liberty Mutual, Berkshire Hathaway (chaired by Buffett), AIG, Starr, and CNA. DFC stated these institutions have deep experience in marine and war risk underwriting, which will enhance the mechanism’s overall underwriting capacity and market coverage.

The core logic of this arrangement is: through a government-backed reinsurance mechanism, commercial insurers are protected from extreme risk, thereby lowering insurance costs for shipowners and cargo owners and encouraging the resumption of shipping operations.

Reinsurance Applications Require Sanctions Screening and KYC Investigation

The Strait of Hormuz carries about one-fifth of the world’s oil and liquefied natural gas shipments, making it one of the world’s most critical energy chokepoints. However, amid recent escalating conflicts, the waterway has become nearly “effectively closed,” causing severe shocks to the global energy market.

The DFC’s policy goal is very clear: to restore shipping confidence.

According to Friday’s notice, ships participating in the reinsurance plan must provide detailed information including country of origin and destination for the voyage, vessel ownership, cargo ownership, and financing banks.

DFC and its partner insurers will use information collected from applicants, as well as sanctions screening and Know Your Customer (KYC) due diligence processes—and any other relevant information obtained and recognized by DFC and its partners—to jointly assess whether a vessel is eligible to be covered by this marine reinsurance mechanism.

This means that, beyond being a financial tool, this mechanism also carries risk filtering and compliance review functions.

Shipping Companies Remain Hesitant: Risk Goes Beyond Costs

Although the newly announced marine insurance protections are significantly strengthened, market response remains cautious.

Shipping companies generally believe that the main issue is not insurance costs but crew safety risks. Iran retains capabilities such as drones, missiles, and sea mines, posing substantial security threats to shipping activity.

Some energy consultancy experts note that only after regional military threats are visibly reduced can insurance rates truly come down and shipping activity fully resume.

Furthermore, the reinsurance plan currently does not include “hard security” measures such as military escort, which limits its practical effect.

Can Financial Tools Replace Military Means? Policy Boundaries Remain to Be Seen

This reinsurance expansion continues the clear recent U.S. approach to the Hormuz issue: giving priority to economic and financial tools instead of direct military intervention to ease market pressures.

However, from a practical point of view, financial measures serve more as a “buffer” rather than a fundamental solution. If security risks are not substantially reduced, even doubling insurance coverage will be hard-pressed to reverse paralyzed shipping operations.

As the conflict evolves and U.S. policy—including whether naval escort will be provided or broader intervention will be taken—becomes clearer, the true effect of this $40 billion insurance “safeguard” remains to be tested by the market.

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